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  • Los Angeles Biomedical Research Institute v. Eli Lilly & Co. (Fed. Cir. 2017); Eli Lilly & Co. v. Los Angeles Biomedical Research Institute (Fed. Cir. 2017)

    By Kevin E. Noonan —

    Federal Circuit SealThe Federal Circuit handed down two related opinions last week, Los Angeles Biomedical Research Institute v. Eli Lilly & Co. and Eli Lilly & Co. v. Los Angeles Biomedical Research Institute, one of which raised the question of whether (and when) it is appropriate for the Court to remand decisions of the Patent Trial and Review Board (PTAB) rendered under the post-grant provisions of the Leahy-Smith America Invents Act (AIA).

    The case arose as an inter partes review (IPR) before the PTAB, wherein the Board held all claims of U.S. Patent No. 8,133,903 to be obvious.  The claims were directed to methods for treating ("arresting or regressing") penile fibrosis.  This condition has two forms:  penile tunical fibrosis, where excess collagen builds up in the tunica albuginea (a membrane surrounding the corpora cavernosa, the chambers that fill with blood during an erection), and corporal tunica fibrosis, where excess collagen builds up in the corpora cavernosa itself.  The claimed treatment is daily administration of type 5 phosphodiesterase (PDE5) inhibitors, said treatment being characterized as "long term" in the opinion.  The class of PDE5 inhibitors includes drugs like sildenafil (Viagra®) and tadalafil (Cialis®), well-known erectile dysfunction treatments; while penile fibrosis can cause erectile dysfunction, the disease is distinct from other causes of ED.

    Claim 1 of the '903 patent is representative:

    1.  A method comprising:
        a) administering acyclicguanosine3',5'-monophosphate (cGMP) type 5 phosphodiesterase (PDE5) inhibitor according to a continuous long-term regimen to an individual with at least one of a penile tunical fibrosis and corporal tissue fibrosis; and
        b) arresting or regressing the at least one of the penile tunical fibrosis and corporal tissue fibrosis, wherein the PDE- 5 inhibitor is administered at a dosage up to 1.5 mg/kg/day for not less than 45 days.

    Eli Lilly petitioned for an IPR after the Los Angeles Biomedical Research Institute (LAB) sued for infringement over the company's marketing of Cialis® for the treatment of penile fibrosis.  The Board instituted an IPR on two grounds:  anticipation (reviewed on appeal in a separate decision captioned Eli Lilly & Co. v. Los Angeles Biomedical Research Institute) and obviousness as reviewed in this opinion.  The Board found the claims obvious based on teaching that PDE5 inhibitors can be used for treating ED (which the Board construed as including penile tunical fibrosis and corporal tissue fibrosis); that ED is a disease associated with aging and, inter alia, atherosclerosis (associated in turn according to the Board with corporal fibrosis), and that long term treatment (at least 45 days) with up to 1.5 mg/kg/day (~100 mg for an average-sized adult male) was effective for treating ED caused by "diabetes, atherosclerosis, smoking, hypertension, or a combination of such factors."  The Board rejected LAB's contention that treatment with PDE5 was thought in the art to exacerbate rather than ameliorate penile fibrosis.

    The Federal Circuit vacated and remanded, in an opinion by Judge Bryson joined by Judge Moore; Judge Newman concurred in part but dissented from the judgment.  The Court first rejected LAB's claim of priority, based on failure to disclose dosages of up to 1.5 mg/kg/day in its the earliest-filed provisional application.  This portion of the opinion considers whether disclosure regarding administration of PDE5 inhibitors to rats at a specific concentration (100 mg/L) would have been understood by a person having ordinary skill in the art to be equivalent to 1.5 mg/kg/day for an adult human male and the Court's opinion that it would not.  Indeed, any such "knowledge" by a skilled person would have been based on speculation, which cannot satisfy the written description requirement according to the panel, citing Lockwood v. Am. Airlines, Inc., 107 F.3d 1565, 1572 (Fed. Cir. 1997) .

    The panel then addressed the Board's claim construction, finding that the Board had "read out of the claim" the limitation of "an individual with at least one of penile tunical fibrosis and corporal tissue fibrosis" by interpreting that phrase to mean "an individual hav[ing] symptoms that may be associated with penile fibrosis, such as [erectile dysfunction], but not that the patient be specifically diagnosed as having penile tunical fibrosis or corporal tissue fibrosis."  According to the opinion, the patent specification makes clear that "penile fibrosis may result in erectile dysfunction, but it may not" and "erectile dysfunction has alternative causes and may present without underlying penile fibrosis."  The patent claims are directed to methods for treating penile fibrosis whether or not it results in the symptoms of erectile dysfunction, and thus the Board wrongly construed this term according to the opinion.  The panel found support for its view on the correct claim construction of this term from the Court's decision in Rapoport v. Dement, 254 F.3d 1053 (Fed. Cir. 2001), where, analogously, claims for treating sleep apnea were not directed to treating the symptoms of sleep apnea.  Accordingly, the Federal Circuit found that the Board had not adopted the broadest reasonable interpretation of the claims but rather an overbroad interpretation.

    Similarly, the opinion rejected the Board's determination that the limitation "arresting or regressing the at least one of the penile tunical fibrosis and corporal tissue fibrosis" is entitled to no patentable weight, as being merely a statement of intended results of PDE5 inhibitor administration according to the claims.  The opinion based this conclusion on the placement of the limitation in the structure of the claim, not as part of a preamble but as an affirmatively recited element.  In addition, the Court found "[o]ther intrinsic evidence" (and thus appropriately subjected to de novo review) that distinguishes the phrase as it is used in these claims from situations where such limitations are present in preambles or "wherein" clauses; this conclusion is supported by examples of efficacy set forth in the specification.

    The Court concluded its review of the Board's claim construction by rejecting LAB's contention that the claim term "continuous long-term regimen" adds an additional limitation regarding steady state plasma concentration or constant dosing level in vivo, because the argument was not supported by the intrinsic evidence from the specification or prosecution history or extrinsic evidence from expert testimony.

    Turning to the Board's conclusion that the claims were obvious, the panel vacated the judgment based on its conclusions regarding the Board's improper claim construction.  Specifically, while the Board found that it would have been obvious to combine the teachings of three prior art references to arrive at a method for treating ED, "[w]hat the Board did not do [] was to find that those references taught treating a patient with penile tunical fibrosis or corporal tissue fibrosis" nor that the references would have provided the skilled worker with a reasonable expectation of success for treating these conditions.  The panel also found wanting reliance on references that taught "on-demand" dosing to support obviousness of claims that recited "long-term daily treatment" with PDE5 inhibitors.

    The Board also erred in rejecting LAB's evidence that the prior art taught that long-term treatment with PDE5 inhibitors was thought to be detrimental because it would increase fibrosis by stimulating nitric oxide production as understood in the art.

    Accordingly, the panel's ruling was that:

    The question remains whether a person of skill in the art would have had a reason to combine [the three cited references] to treat penile fibrosis with a long-term regimen of a daily dosage of a PDE5 inhibitor, and would have had a reasonable expectation of success from doing so.  Because the Board's obviousness analysis was based on an erroneous construction of the claim language and an overly broad interpretation of [one of the references], and because the Board did not address the record evidence summarized above, we remand for the Board to make new findings as to whether there was an apparent reason to combine the prior art references and whether that combination would have rendered obvious the long-term administration of PDE5 inhibitors to treat penile fibrosis.

    The opinion also mandates that on remand the Board "make the findings necessary to determine whether the references render the 'arresting or regressing' limitation obvious, but affirmed the Board's finding that the dosage limitation ("up to 1.5 mg/kg/day for not less than 45 days") is disclosed in the prior art.

    Judge Newman dissented because she believed the Board had established obviousness.  In addition, however, she voiced her belief that remand was inappropriate and contrary to the IPR provisions of the AIA.  In her view:

    The America Invents Act was enacted to remedy the lack of expedition and to add predictability in infringement disputes, by assigning to an expert administrative tribunal and presumed expert federal court the resolution of some major patentability issues, with tight procedural rules and deadlines.  It was expected that in the normal course questions of patentability under Section 102 and 103 would be reliably and speedily resolved.  Implementing this policy, when we find analytic lapses by the PTAB, it appears that the statute contemplates that we will make the determination, on the record that was made at the Board.  Indeed, the depth of briefing by the parties suggests that this was their understanding, too.

    Remands are contrary to this understanding of the intent of Congress in enacting the IPR provisions of the AIA, and thus while Judge Newman does not believe remands are never appropriate, they should be rare.

    In the companion case, the Federal Circuit affirmed the Board's determination that the asserted reference (International Publication No. WO 01/80860) did not anticipate the claims, because it did not disclose the limitation that PDE5 inhibitors be administered "at a dosage up to 1.5 mg/kg/day for not less than 45 days."  While conceding that the reference might "suggest" long-term dosing, the panel held that such suggestion is not enough to satisfy the anticipation standard, citing AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, 1055 (Fed. Cir. 2010), in support of its interpretation.

    Los Angeles Biomedical Research Institute v. Eli Lilly & Co. (Fed. Cir. 2017)
    Panel: Circuit Judges Newman, Bryson, and Moore
    Opinion by Circuit Bryson; opinion concurring in part, dissenting from the judgment by Circuit Judge Newman

    Eli Lilly & Co. v. Los Angeles Biomedical Research Institute (Fed. Cir. 2017)
    Panel: Circuit Judges Newman, Bryson, and Moore
    Opinion by Circuit Judge Newman

  • USPTO Adds New Features to PatentsView Tool

    By Donald Zuhn —

    USPTO SealIn January, the U.S. Patent and Trademark Office announced the addition of several new features to its patent data visualization and analysis tool, PatentsView, which allows the public to interactively engage, through a web-based platform, with a database connecting 40 years of information about inventors, their organizations, and their locations.

    The revised PatentsView interface presents three new starting points for users: relationships, locations, and comparisons.  The relationships starting point allows users to take a look at the relationships behind the 100 most cited patents granted since 2001.  Users can explore the network of inventors and assignees on those patents.  For example, the relationships visualization below (click to enlarge) shows that Californians invented 44 of the top 100 most cited U.S. patents granted since 2001, including, for example, TiVo's patent for a multimedia time warping system.

    Relationships_CA_v3_Tivo
    The locations starting point allows users to explore the locations where inventors and assignees have been granted patents since 2012, by providing an interactive worldwide map of the cities where innovation originates.  For example, the locations visualization below shows the patents, inventors, and assignees for the regional innovation hub of Atlanta.

    Locations_ATL_v3
    Finally, the comparisons starting point allows users to compare the patterns in innovation across various locations and technology areas since 1976.  For example, the comparison visualization below shows that over the past two decades there have been more inventors on patents for computer hardware, data processing, and information storage technology than in any other technical field.

    Comparisons_v5
    The Office notes that from the above starting points, users can further explore comprehensive detail views for each patent, inventor, firm, and location.  The collaborative tool was developed by the USPTO's Office of the Chief Economist in conjunction with the American Institutes for Research, New York University, the University of California at Berkeley, Twin Arch Technologies, and Periscopic.

  • Conference & CLE Calendar

    CalendarMarch 8, 2017 – "How to Structure PTAB Proceedings and Appeals before the Federal Circuit" (American Bar Association Center for Professional Development and Section of Intellectual Property Law) – 1:00 to 2:00 pm (ET)

    March 9, 2017 – "After Life Tech v. Promega: Litigation and Business Strategies for Patent Owners and Defendants" (Intellectual Property Owners Association) – 2:00 to 3:00 pm (ET)

    March 9, 2017 – "How to Use Broadest Reasonable Interpretation to Your Advantage in Patent Prosecution — Establishing Scope of Claims, Avoiding Sect. 112(f), Preserving Enforceability" (Strafford) – 1:00 to 2:30 pm (EST)

    March 9-10, 2017 - Advanced Patent Law Seminar (Chisum Patent Academy) – Cincinnati, OH.

    March 14, 2017 – "Post-Grant Review at the PTAB: What Petitioners and Patent Owners are Doing and What Lies Ahead?" (McDonnell Boehnen Hulbert & Berghoff LLP) – 10:00 am to 11:15 am (CT)

    March 15, 2017 - Intellectual Property Law Symposium (Federal Circuit Bar Association and Intellectual Property Law Association of Chicago) – Chicago, Illinois.

    March 16, 2017 - Biotechnology/Chemical/Pharmaceutical (BCP) customer partnership meeting (U.S. Patent and Trademark Office) – Alexandria, VA

    March 16, 2017 – "Advice of Counsel Defense in Patent Litigation: Protecting Attorney-Client Privilege — Limiting Scope of Discovery, Safeguarding Confidential Communications and Information" (Strafford) – 1:00 to 2:30 pm (EDT)

    ***Patent Docs is a media partner of this conference or CLE

  • BCP Customer Partnership Meeting

    USPTO Building FacadeThe U.S. Patent and Trademark Office will be holding its next biotechnology/chemical/pharmaceutical (BCP) customer partnership meeting on March 16, 2017 at the USPTO Headquarters (Alexandria, VA).  The agenda for the meeting is as follows:

    • Welcoming and Opening Remarks (10:00 – 10:10 am EDT) — Jerry Lorengo, Director, TC1600, USPTO; Daniel Sullivan, Director, TC1600, USPTO; and Wanda Walker, Director, TC1600, USPTO

    • Rationale Statements in 35 U.S.C. 103 (10:10 – 11:10 am) — Cassandra Spyrou, Supervisory Review Quality Assurance Specialist, OPQA, USPTO

    • The Role of Inherency in Making an Obviousness Determination (11:10 – 12:00 pm) — William Smith, Of Counsel, BakerHostetler

    • Lunch (12:00 pm – 1:00 pm)

    • 37 CFR §1.132 Practice, Unexpected Results (1:00 – 1:40 pm) — Scarlett Goon, QAS, TC1600, USPTO

    • Range Analysis (1:40 – 2:40 pm) — Jean Witz, SPE, CRU, USPTO

    • Break (2:40 – 2:50 pm)

    • Interview Practice (A Practitioner’s Perspective) (2:50 – 3:50 pm) — Charles Andres, Associate, Patent and Innovation, WSGR

    • Interview Training (USPTO) (3:50 – 4:30 pm) — Frederick Krass, SPE, TC1600, USPTO

    • Closing Remarks (4:30 – 4:40 pm) – Directors, TC1600, USPTO

    Additional information regarding the BCP customer partnership meeting, including registration information for those wishing to attend the meeting or register for online participation, can be found here.

  • IPO Webinar on Life Tech v. Promega

    IPO #2The Intellectual Property Owners Association (IPO) will offer a one-hour webinar entitled "After Life Tech v. Promega: Litigation and Business Strategies for Patent Owners and Defendants" on March 9, 2017 from 2:00 to 3:00 pm (ET).  Paul Berghoff of McDonnell Boehnen Hulbert & Berghoff LLP, Irena Royzmanm of Patterson Belknap Webb & Tyler LLP, and Bradford Schmidt of Agilent Technologies will consider what new legal battles are likely to follow from last month's U.S. Supreme Court decision in Life Tech. v. Promega, and also discuss strategies for patent prosecution and global supply chain management going forward.

    The registration fee for the webinar is $135 (government and academic rates are available upon request).  Those interested in registering for the webinar can do so here.

  • Intellectual Property Law Symposium

    Federal Circuit Bar AssociationThe Federal Circuit Bar Association (FCBA) and Intellectual Property Law Association of Chicago (IPLAC) will be co-sponsoring an Intellectual Property Law Symposium on March 15, 2017 from 8:45 am to 5:00 pm (CT) at the University Club of Chicago in Chicago, Illinois.  The program will include presentations on the following topics:

    • Willful Infringement After Halo: Back to The Future?
    • Case Management in the Northern District of Illinois and Eastern District of Wisconsin: considerations for different types of patent cases
    • True or False – PTAB Trials and Alice Motions Simplify the Case?
    • Lunch keynote — Hon. James F. Holderman will address "The Benefits and Detriments of Private vs. Public Dispute Resolution"
    • Is Your Data Safe? Cybersecurity and Protection of Trade Secrets under the Defend Trade Secrets Act
    • Patent Cases to Watch in 2017
    • Ethical Considerations – Subject Matter Conflicts

    IPLACThe registration fee for the webinar is $250 (FCBA or IPLAC members) or $295 (non-members).  Additional information regarding the program, including an agenda, list of panelists, and registration details, can be found here.

  • Webinar on Advice of Counsel Defense in Patent Litigation

    Strafford #1Strafford will be offering a webinar/teleconference entitled "Advice of Counsel Defense in Patent Litigation: Protecting Attorney-Client Privilege — Limiting Scope of Discovery, Safeguarding Confidential Communications and Information" on March 16, 2017 from 1:00 to 2:30 pm (EDT).  Michael E. McCabe, Jr. of Funk & Bolton and Eleanor M. Yost of Carlton Fields Jorden Burt will provide patent counsel with an examination of the role of advice of counsel defense in patent infringement cases in the aftermath of Halo, and the temporal and subject matter scope of the potential waiver of the attorney-client privilege and work product protection when an accused infringer relies upon such a willfulness defense. The panel will also discuss the Krausz decision and offer guidance to counsel and companies for protecting privileged communications and attorney work product when relying upon an advice of counsel defense.  The webinar will review the following issues:

    • What is the practical impact of recent Supreme Court and federal court decisions on utilizing opinions of counsel in defense of willful infringement while protecting privileged communications and attorney work product?
    • What considerations regarding possible waiver of the attorney-client privilege and work product immunity should counsel consider before asserting the advice of counsel defense in a patent infringement litigation?
    • What are the best practices for counsel and corporations to preserve the attorney-client privilege and work product immunity?

    The registration fee for the webinar is $297.  Those interested in registering for the webinar, can do so here.

  • U.S. Chamber of Commerce Releases International IP Index

    By Donald Zuhn —

    U.S. Chamber of CommerceLast month, the U.S. Chamber of Commerce released its 5th annual International IP Index, entitled "The Roots of Innovation," which provides an "IP report card" for 45 world economies that account for 90% of the global gross domestic product.  The Index's ratings are based on an analysis of 35 indicators in six categories: (1) patents, related rights, and limitations; (2) copyrights, related rights, and limitations; (3) trademarks, related rights, and limitations; (4) trade secrets and market access; (5) enforcement; and (6) membership and ratification of international treaties.

    According to David Hirschmann, president and CEO of the Global Intellectual Property Center (GIPC) of the U.S. Chamber of Commerce, the Index "shows that a clear pack of leaders has emerged" with regard to IP protection:  the United States, United Kingdom, Japan, and European Union.  However, he also noted that "all that invest in the systemic recognition and protection of IP stand to reap the benefits: foreign investments, healthier home-grown industries that export innovative products, and a reputation as a place where the world can do business."  Mark Elliot, executive vice president of GIPC, indicated that "[s]ome developed countries, including Canada and Australia, continue to implement policies that undermine their proud traditions of IP-led innovation," and that "even world leaders such as the U.S. have room to grow and improve."

    The Index identified several IP developments, including:

    • Several economies recognized the value of leveraging international partnerships through Patent Prosecution Highways (PPH).

    • IP-intensive industries continued to face challenges in the Indian market with regard to the scope of patentability for computer-implemented inventions.

    • A number of governments attempted to limit the scope of patentability via both judicial decisions and legislation.  While the Canadian government continued to apply the heightened patent utility standard, the Indonesian Patent Law introduced a heightened efficacy requirement for patentability and outlawed second use claims.

    • Both individual governments and representatives of the multilateral institutions encouraged public officials to utilize compulsory licenses and expanded exceptions and limitations in the name of increasing access.  In Colombia, the government threatened to use a compulsory license in an attempt to drive down the price of innovative medicine.

    The 45 economies benchmarked by the GIPC are shown in Table 1 of the report (click on table to enlarge), divided by World Bank region.

    Table 1
    With the addition of five new indicators in the latest edition of the IP Index, the maximum possible score increased from 30 to 35.  Overall scores for the 45 benchmarked economies are shown in Figure 4 of the report (click on Figure to enlarge), with the U.S. (32.62), UK (32.39), and Germany (31.92) finishing in the top three.

    Figure 4
    With respect to the scores for Category 1 (patents, related rights, and limitations), the UK, Switzerland, Sweden, Germany, and France all finished with a score of 7.5.  The remaining scores for this category are shown below (click on Figure to enlarge).

    Category 1
    For Category 4 (trade secrets and market access), the U.S., Switzerland, New Zealand, Japan, Israel, and Canada all finished with a score of 3.  The remaining scores for this category are shown below (click on Figure to enlarge).

    Category 4
    The bulk of the IP Index provides individual reports for each of the 45 benchmarked economies.  The report for the U.S. indicates that the overall score dropped from 95% (i.e., a score of 28.61 out of 30) in the 4th edition of the Index to 93% (i.e., a score of 32.62 out of 35) in the latest edition of the Index.  With respect to patentability requirements, the report notes that "the patenting environment in the U.S. continues to be affected by uncertainty as to how to interpret Myriad and other key decisions, and greater clarity, consistency, and closing of gaps with international best practices is crucial to upholding a supportive innovation environment."  The report also points out that a group of court decisions –- particularly, McRO v. Bandai Namco, BASCOM v. AT&T Mobility, and Amdocs v. Openet Telecom –- "suggests that software patents that otherwise meet patentability criteria may be considered patent-eligible and clarifies that claims directed to software are not automatically considered to be patent-ineligible abstract subject matter."

    In discussing patent opposition developments in the U.S., the Index indicates that:

    Despite the intention of the new opposition mechanisms, the ease of challenging patents during the post-grant period, particularly via inter partes review, has led to a high rate of trials (particularly for life sciences claims) and of rejections (between 40% and 65% depending on the type of technology), with challenges considered by some experts to be disproportionately funded by bad faith actors.

    In view of the above, the Index concludes that "the opposition system in the U.S. still represents a potential channel for bad faith actors and can involve a great deal of cost and uncertainty for patent owners compared to other post-grant opposition systems."

    As for trade secret developments, the Index highlights passage of the Defend Trade Secrets Act in 2016, noting that "[t]he new framework aids in enhancing the protection of trade secrets across the U.S."

    The GIPC also provided a Supplemental Statistical Analysis with the IP Index.  A summary of selected portions of the supplemental analysis will be provided in a subsequent post.

  • Bloomberg and AIPLA Conduct Survey on Attitudes about PTAB

    By Kevin E. Noonan —

    CoverEarlier this month, Bloomberg Law and the American Intellectual Property Law Association released a report entitled "Patent Owners, Petitioners not Far Apart on PTAB Value."  This report was the result of a research study performed in November and December of 2016 by AIPLA and Bloomberg Law, asking respondents their views on the Patent Trial and Appeal Board (PTAB), and in particular, the effects of post-grant review (particularly inter partes review proceedings) on patent litigation, value, licensing and other topics.

    The study surveyed a total of 334 respondents, comprising 167 patent attorneys and agents, 62 in-house and 105 outside counsel.  Overall, two thirds of respondents rated the benefits of IPRs to be 7 or greater (on a scale of 1-10).  These results were variable with circumstance:  85% of petitioners in active litigation and 48% of patent owners rated the benefits of IPRs to be greater than 7 on that scale, with 42% of petitioners in litigation but only 16% of patent owners rating IPRs as a 10.  The seemingly anomalous receptivity from patent owners may reflect resignation, but perhaps even more so the recognition that surviving an IPR raises litigation estoppel, enhances the perception of validity, and inspires confidence in enforcement, due to the broader scope of claims as considered by the PTAB and the lower evidentiary standard for petitioners compared with patent infringement litigation defendants.  Both petitioners (88%) and patent owners (68%) believe IPRs provide lower cost benefits over district court litigation and similar statistics (80% petitioners, 57% patent owners) show that respondents believe that IPRs speed up litigation.

    Petitioners (64%) appreciate the technical expertise of PTAB APJs, but 32% of patent owners believe that expertise is the reason for adverse PTAB outcomes.  Petitioners (39%) and patent owners (49%) agree that the lack of a presumption of validity is an important aspect of IPRs that operate in their favor or against them, respectively, and similar responses were obtained (petitioners, 31%; patent owners, 48%) regarding the broadest reasonable interpretation standard for claim construction before the PTAB.  Similarly, the majority of both patent owners and petitioners responded that IPR outcomes influence patent infringement litigation.

    Finally, the value of licenses and the value of patents decreased somewhat, although license value was less strongly affected (26% vs. 43%).  And the majority (60%) of respondents reported no change in patent application budgets as a result of infringers having the IPR option.

    Bloomberg and AIPLA do not claim any statistical significance for this survey, inter alia, due to the small sample size.  While somewhat intriguing, it will likely take a generation for any clear cut trend to emerge regarding the effects of IPRs on patenting, innovation, and whether the oft-invoked justifications for these and other post-grant review provisions yield the benefits their proponents so loudly predicted.

  • Secure Axcess, LLC v. PNC Bank National Association (Fed. Cir. 2017)

    Federal Circuit Finds That USPTO Board Interpreted CBM Statute Too Broadly

    By Joseph Herndon —

    Federal Circuit SealIn an appeal of a Covered Business Method (CBM) patent review, the Federal Circuit overturned a decision by the U.S. Patent and Trademark Office's Patent Trial and Appeal Board that U.S. Patent No. 7,631,191 is a CBM patent, and vacated the Board's determination that the claims were unpatentable as obvious in view of the cited prior art.  This is another decision by the Federal Circuit reining in the scope of what constitutes a CBM patent, and hopefully, preventing future Board panels from using the CBM too liberally.

    The Patent-at-Issue

    Secure Axcess owns the '191 patent entitled "System and Method for Authenticating a Web Page."  According to the patent, the invention relates generally to computer security, and more particularly, to systems and methods for authenticating a web page.  Claims 1 and 17 are illustrative:

    1.  A method comprising:
        transforming, at an authentication host computer, received data by inserting an authenticity key to create formatted data; and
        returning, from the authentication host computer, the formatted data to enable the authenticity key to be retrieved from the formatted data and to locate a preferences file,
        wherein an authenticity stamp is retrieved from the preferences file.

    17.  An authentication system comprising:
        an authentication processor configured to insert an authenticity key into formatted data to enable authentication of the authenticity key to verify a source of the formatted data and to retrieve an authenticity stamp from a preferences file.

    The '191 patent, in discussing the invention, explains that an Internet user might be misled to the wrong website without proper authentication.  To illustrate the problem, the '191 patent uses http://www.bigbank.com vs. http://www.b[l]gbank.com (with an 'l' instead of an 'i').  Also, despite typically referring to Internet "users," the patent occasionally refers to "customers," and "consumers".  The written description further explains that "[t]he web server can be any site, for example a commercial web site, such as a merchant site, a government site, an educational site, etc."  Thus, it is clear that many examples and applications of use of the invention described in the '191 patent include authentication of data for use in financial activities.

    Procedural History–Board

    The Board reasoned that because the '191 patent is directed to solving problems related to providing a web site to customers of financial institutions, the '191 patent covers the ancillary activity related to a financial product or service of Web site management and functionality and so, according to the legislative history of the AIA, the method and apparatus of the '191 patent perform operations used in the administration of a financial product or service.

    The Board also observed that the patent owner's allegations of infringement by approximately fifty financial institutions was a factor weighing toward the conclusion that the '191 patent claims a method or apparatus that at least is incidental to a financial activity, even if other types of companies also practice the claimed invention.

    Federal Circuit's Response

    Congress defined a "covered business method patent" as a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.

    The Federal Circuit found that the statutory definition by its terms makes what a patent "claims" determinative of the threshold requirement for coming within the defined class.  But since a claim in a patent does not live in isolation from the rest of the patent, the written description bears importantly on the proper construction of the claims.  Thus, the Federal Circuit determined that the statute requires that it is the claims, in the traditional patent law sense, properly understood in light of the written description, that identifies a CBM patent.

    The Federal Circuit further analyzed the "financial product or service" prong of the CBM definition, and found that the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element.  The claim need only require one of a "wide range of finance-related activities," examples of which can be found in the cases which the Federal Circuit has held to be within the CBM provision, but it must be in the claim.

    The fact that the patent owner has allegations of infringement by approximately fifty financial institutions, or the patent owner's choice of litigation targets, is not a determinative factor and could be influenced by a number of considerations, such as the volume of a particular target's perceived infringement; the financial condition of the target; which targets are most likely to be willing to settle rather than bear the cost of litigating; available and friendly venues; and so on.  Those choices do not necessarily define a patent as a CBM patent, nor even necessarily illuminate an understanding of the invention as claimed.

    Just because an invention could be used by various institutions that include a financial institution, among others, does not mean a patent on the invention qualifies under the proper definition of a CBM patent.

    The Federal Circuit thus determined that the Board erred in deciding this case as a CBM under its overly-broad statutory definition, and the Board's other determinations, including claim constructions as they bear on obviousness and the obviousness determination itself, were vacated.

    Dissent

    Judge Lourie authored a dissent, providing the opinion that the claims of the '191 patent are surely claims to a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.

    Judge Lourie stated that the '191 patent makes clear that the invention is to be used in the management of a financial service.  However, there was no evidence provided that the invention "must" be used in the management of a financial service, and the claims were drafted to include broader applications.

    Judge Lourie went on to use the fact that Secure Axcess has sued 50 banking institutions as evidence of what they believe their invention is "used" for.

    Judge Lourie argued that if a method claim otherwise satisfies the requirements of 35 U.S.C. § 112, it need not recite an ultimate use, and the written description of the '191 patent tells us that the invention is to be used for financial management.

    Judge Lourie opined that the majority escaped the clear purport of the invention by ranging into a discussion of the meaning of claims in patent law, and ignored the statutory language "used in the practice."  Again, Judge Lourie argued that the claims need not recite usage, and the written description provides that for us.

    Judge Lourie concluded by saying that common sense is not precluded from use in interpreting statutes and claims, and suffice it to say that the relation of this invention to the financial world is one of substantial identity compared with an incidentally-used invention like a lightbulb or ditch-digging.

    Absent from the dissent's analysis, however, is anything in the claim itself that can be considered a financial activity.  Following the dissent's analysis would require importing limitations of "use" into the claim in instances where the claim was drafted more broadly.  Thus, it appears the majority has a more sound analysis in place, and when the claim language is clear on its face and drafted to include uses not limited to financial activities, the patent should not be considered eligible for CBM patent review.

    Secure Axcess, LLC v. PNC Bank National Association (Fed. Cir. 2017)
    Panel: Circuit Judges Lourie, Plager, and Taranto
    Opinion by Circuit Judge Plager; dissenting opinion by Circuit Judge Lourie